charlie munger on tesla and elon musk

Berkshire Hathaway vice chairman Charlie Munger has praised Tesla’s CEO Elon Musk and termed Tesla as a “minor miracle” in the automotive industry.

Speaking with CNBC, Munger said, “I was certainly surprised that Tesla did as well as it did,” He added, “I do not equate Tesla with bitcoin. Tesla has made some real contributions to this civilization. Elon Musk has done some good things that others couldn’t do.”

Notably, both Munger and Berkshire Hathaway chairman Warren Buffett are dismissive of cryptocurrencies. Buffett once termed bitcoin as “rat poison squared.” However, many analysts see cryptocurrencies as an attractive asset class. We have a guide on how beginners can buy bitcoins.

Coming back to Munger, he was all praise for Musk. He said, “We haven’t had a successful new auto company in a long, long time. What Tesla has done in the car business is a minor miracle.”

Notably, last year, Tesla’s market cap surpassed $1 trillion and it became the first automaker ever to achieve that feat. While Tesla’s market cap has since slumped to around $600 billion, it is still 2.5x that of Toyota Motors.

Meanwhile, while Munger has praised Musk, the world’s richest person does not share a good relationship with Buffett. In 2019, Buffett said that Musk has “room for improvement.” Musk also said later that he is not a big fan of Buffett.

Charlie Munger Terms Tesla’s Success as a “Miracle”

Many would agree that Tesla’s success is no less than a miracle. Not many automakers as well as analysts gave the company much chance until about four years back. Before Q3 2019, Tesla was barely profitable in a handful of quarters. It was delivering very few cars, and markets doubted whether the company can achieve scale.

However, it has scaled up production quite fast and the ramp-up at Shanghai Gigafactory puts even the established automakers to shame. Tesla delivered over 900,000 cars last year.

For the last many quarters, Tesla has said that its deliveries would rise at a CAGR of 50% over the foreseeable future. During the third quarter earnings call, it said that while in some years the delivery growth would be below 50%, in others it would surpass that number, bringing the average to 50% or higher.

Tesla’s margins are also better than many other automakers. It also has a strong balance sheet, thanks to the $13 billion stock sale in 2021. Tesla has posted profits in every quarter since Q3 2019 which is commendable as the automotive industry witnessed severe losses in the first half of 2020 due to the COVID-19 lockdowns.

Tesla Stock Has Fallen after Musk Acquired Twitter

Tesla stock has fallen after Musk completed his acquisition of Twitter last month. Musk’s Twitter acquisition was full of drama, as most things associated with the world’s richest person invariably tend to be. While Musk backed out of the deal, he had to eventually agree to buy Twitter amid the legal battle, where most believe he stood little chance anyway.

Even after the acquisition, Musk is invariably in news over Twitter. He has laid off almost half of Twitter employees and mocked those unwilling to pay $8 per month for the blue tick verification.

The fallout is visible in Tesla stock also and even long-time bull Dan Ives removed Tesla from his top ideas list. Ives however maintains a buy rating on Tesla stock.

Musk On EV Competition

Meanwhile, EV competition is heating up globally. Saudi Arabia has announced a joint venture with Foxconn for EV (electric vehicle) production. Both Saudi Arabia and Foxconn see a big opportunity in electric cars as the world economy transitions towards zero-emission cars.

Foxconn also bought the Lordstown Plant from Lordstown Motors where it now makes Endurance pickups for the company. Foxconn has also partnered with Fisker for its second car.

On multiple occasions, Musk has mocked other EV companies as well as legacy automakers. Last year, he took potshots at the massive valuation of Rivian. Rivian stock has since plunged amid the crash in growth shares.

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